Creating a Flip Budget

Welcome to my first official blog post!

Let's get into it. I have a draft template for all my flip projects that I use to add + delete as necessary, which seems like a simple solution when forging ahead on a new home renovation project - but there may be some things you aren't aware you may need to include.

Real Estate Commissions

When you're embarking on a flip project, it's easy to get straight to the good stuff - cost of a new faucet, how much paint you'll need for the living room, or the amount of flooring you may need to resurface the kitchen. But, including the cost of real estate commissions when it's time to sell the home is a HUGE aspect of your budget. In Saskatchewan, it's typically 6% on the first $100,000, 4% on the second $100,000, and then 2% on the remaining amount. So, if you're flipping a house that you purchased for $300,000, and after putting in $50,000 of renovation costs, when it's time to list the newly renovated home for (let's say) $450,000, the real estate commissions on the seller will be $16,650! Word to the wise: Make sure you factor in the commissions before deciding on whether to add those fancy light fixtures or go with something more budget conscious.

Insurance Another factor to consider in your budget are insurance rates for yourself, and if you have any workers that don't have their own insurance, and not including home insurance for any act-of-god situations, flooding or a fire (which is also great to have when someone isn't physically living in the residence). Insurance is one of those tricky and sometimes controversial subjects that some may say you don't need, until you're in a situation where you wished you had it. In all of my projects, I include a basic insurance plan to cover my butt for any events that may arise along the way.

Utilities + Property Taxes

When purchasing a home, whether you intend on living in it, or in my case - not living in the residence, utilities and property taxes still need to be paid monthly. Seems like common sense, but just in #1, sometimes those every day 'home owner' expenses get lost during renovation planning excitement!

Permits

Getting a permit approved by your local city hall is a requirement for most cities and towns, whether you're doing the home improvements yourself or using trades to accomplish the renovations for you. Permits can range anywhere from $900-1,500 depending on the severity of the renovation, so keep that figure in mind when organizing and planning ahead.

Interest on Loans

Most of these topics touch on the lousy side of the house flipping business, but end up reflecting your overall profit, if overlooked. The next topic is interest on bank loans. Depending on how you go about purchasing your first property investment, you may need to acquire a loan to float you the money to service the renovation. If this is the case for you, taking into account the interest owed per month on the loan can greatly affect your overall profit, especially if your original plan was to flip the house in four months, and it ends up taking nine months. An additional five months of interest costs can be costly, depending on your interest rates!

Exteriors + Landscaping

This is one topic that some house flipping don't touch at all. A lot of the 'flippers' I have seen tend to show just the interior shots of a house they finished renovating, and although it looks fabulous - I often wonder what was renovated or fixed up on the exterior and landscaping. Coming from a wedding and event planning background, I always felt that an impact needs to be made immediately upon arrival at the wedding venue. This is their first impression on what to expect inside. I always factor in exterior fixes, even if it's just replacing the old house numbers for new modern ones, or adding some perennial plants along the sidewalk edging. I do this for a variety of reasons, but the main one is that when a potential buyer drives up to the newly renovated house, I want them to be able to picture themselves immediately calling it their home, and being proud of how it looks amongst the neighbourhood. If your lawn is green, and the plants are thriving, it already looks and feels like a healthy beautiful home.

There are many more factors and considerations that need to be taken into account when embarking on a house flip journey, but besides the tricky, and sometimes left out, costs above, it can be a great way to make a substantial amount of money in a short time frame.

Thanks for following along, and I look forward to sharing more thoughts and stories again.

• Claire